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ArcelorMittal Looks to Shareholders for Funds After Massive Loss

PARIS --ArcelorMittal (IW 1000/49) said Friday it would ask shareholders for fresh funds, sell assets and slash costs after falling commodity prices pummeled its performance last year, leaving a gaping hole in its accounts.

The world's largest steelmaker reported a net loss of $7.95 billion for 2015, more than four times the previous year's net loss of $1.86 billion in 2014.

To help fill the shortfall, ArcelorMittal said it would tap into shareholders' pockets via a capital increase of $3 billion by mid-2016, and also sell its stake in Spanish automotive company Gestamp, roughly netting another $1 billion.

The company's shares plunged in anticipation of the cash call, dropping by nearly 6%t on the New York stock market, having earlier posted similar losses on European exchanges.

"Having already seen its market capitalization decline in recent years, ArcelorMittal now can't avoid a big dilution for shareholders with this capital increase of $3 billion," brokers Aurel BGC said in a note.

Analysts at Societe Generale called the cash call "disappointing, but certainly a reflection of very difficult market conditions."

Over half of the 2015 loss was due to writing down in its books the value of its mining operations to reflect the currently lower value of its iron ore, but even excluding exceptional items ArcelorMittal was $300 million into loss, compared to $400 million in 2014.

Chief executive Lakshmi Mittal acknowledged in a statement that "2015 was a very difficult year for the steel and mining industries... Prices deteriorated significantly during the year as a result of excess capacity in China..

Finance Director Aditya Mittal told an audio conference with reporters that his company is discussing with the EU Commission and other European producers ways to defend themselves against cheap steel imports from China, which has been accused of dumping its excess production on the world market at below cost.

"If you look at the operating results of steel companies, the level of Chinese exports and the impact on prices in our main markets, it is clear that there is an urgent need for action," he said.

However, Lakshmi Mittal said in the statement that the mining business "is fully focused on adapting to this low price environment and has reduced cash costs by 20% compared with an initial target of 15%."

Mittal said a further 10% reduction in mining costs is targeted for 2016.

New Restructuring Plan

Sales dropped 20% to $63.6 billion, which mostly reflects falling prices as the company's iron ore production and steel shipments only dipped marginally.

Net debt dipped to $15.7 billion at the end of 2015 from $15.8 at the end of 2014.

Earnings before taxes, depreciation and amortization (EBITDA) fell by 28% to $5.2 billion.

The company announced a new restructuring plan that aims to raise EBITDA per ton to above $85, irrespective of changes in raw material prices. It fell from $86 per ton in the fourth quarter of 2014 to $56 in the fourth quarter of 2015.